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Ramalingam

Ramalingam Kalirajan  |8319 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Feb 02, 2024

Ramalingam Kalirajan has over 23 years of experience in mutual funds and financial planning.
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more
Asked by Anonymous - Jan 09, 2024Hindi
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Is ICICI Prudential S&P BSE Sensex Index Fund Direct Growth good to invest in longer term.I have been investing for 3 years now .Getting XiRr of 17%

Ans: If you are not able to select a good actively managed equity fund, then you can continue to invest in this.
DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.
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Ramalingam

Ramalingam Kalirajan  |8319 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 18, 2024

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I have invested rs 5 lac in axis tax saver direct growth on 10th april.is it a good fund and can i tansfer to direct IDCW plan.
Ans: That's a great question! Investing Rs. 5 lakh in Axis Tax Saver Direct Growth on April 10th shows initiative. Here's a breakdown of your current fund and the pros and cons of Direct vs. Regular Mutual Fund investment plans:

Axis Tax Saver Direct Growth:

Reputable Fund House: Axis Mutual Fund is a well-established fund house.

Tax Benefits: ELSS (Equity Linked Savings Scheme) funds offer tax deductions under Section 80C.

Direct Plan: You've chosen a Direct Plan, which has a lower expense ratio (fee) compared to a Regular Plan. However, there are some trade-offs to consider:

Disadvantages of Direct Plans:

No Advisor Guidance: Direct plans don't involve a distributor or advisor. You'll need to do your own research and choose funds.

Limited Support: There might be limited hand-holding or investment guidance compared to a Regular Plan.

Portfolio Management: The responsibility of monitoring your portfolio and making adjustments falls on you.

Benefits of Regular Plans (through a Mutual Fund Distributor - MFD):

Personalized Advice: An MFD can assess your risk tolerance and goals, recommending suitable funds.

Ongoing Support: They can provide ongoing support, answer your questions, and help navigate market fluctuations.

Convenience: They handle paperwork, account opening, and transactions, saving you time.

MFD with CFP Qualification:

Expert Guidance: Consider an MFD with a Certified Financial Planner (CFP) qualification. They have advanced financial planning knowledge and can create a personalized investment plan for you.
Considering Transfer to IDCW Plan:

Exit Load: Check if Axis Tax Saver Direct Growth has an exit load (fee for exiting within a specific period).

Similar Investment Style? Ensure the IDCW plan has a similar investment style and tax benefits as your current fund.

Review Both Funds: Research both Axis Tax Saver Direct Growth and the IDCW plan to compare their performance and investment strategies.

Remember:

Long-Term View: Focus on your long-term investment goals. Equity markets can be volatile in the short term.

Diversification Matters: Consider if this ELSS fund fits with your overall asset allocation (mix of investments).

By potentially consulting an MFD-CFP, you can gain valuable guidance and build a portfolio aligned with your goals, even if you decide to stick with your Direct Plan!

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |8319 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Aug 08, 2024

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Kotak Nifty Midcap 50 Index fund Direct Plan growth - Pl suggest is it good for investment for new entry investors.
Ans: Index funds track a market index. They aim to match the index's performance. They offer lower costs and less active management.

Disadvantages of Index Funds

Limited Flexibility: Index funds are bound to the index. They can't adapt to market changes.

Average Returns: They aim to match, not beat, the market. Actively managed funds often outperform.

Market Risk: They mirror the market. In a downturn, they suffer equally.

Benefits of Actively Managed Funds

Professional Management: Experienced managers make investment decisions. They aim to outperform the market.

Flexibility: Managers can adjust the portfolio based on market conditions.

Potential for Higher Returns: Active funds often deliver higher returns than index funds.

Disadvantages of Direct Funds

No Advisory Support: Direct funds bypass intermediaries. Investors miss out on professional advice.

Time-Consuming: Managing direct investments requires time and knowledge. Many investors lack both.

Risk Management: Without a Certified Financial Planner, investors may struggle with risk management.

Benefits of Regular Funds with MFD and CFP

Expert Guidance: A CFP offers tailored advice. They help in selecting the right funds.

Convenience: Investing through an MFD and CFP saves time. They handle paperwork and portfolio management.

Risk Management: CFPs help in managing and mitigating risks. They provide a balanced portfolio strategy.

Kotak Nifty Midcap 50 Index Fund Overview

This fund tracks the Nifty Midcap 50 Index. It invests in 50 midcap companies. It offers exposure to mid-sized companies.

Performance and Risks

Potential Growth: Midcap companies can grow quickly. They offer higher returns than large caps.

Volatility: Midcaps are more volatile. They carry higher risk than large caps.

Market Dependence: The fund's performance depends on the midcap market. In a downturn, it can underperform.

Suitability for New Investors

Risk Tolerance: New investors must assess their risk tolerance. Midcap funds can be volatile.

Investment Horizon: Longer investment horizons can mitigate risks. Midcap funds need time to grow.

Diversification: Ensure a diversified portfolio. Don't invest solely in midcap funds.

Recommendations for New Investors

Seek Professional Advice: Consult a Certified Financial Planner. They provide personalized guidance.

Start with Balanced Funds: Consider funds with a mix of large, mid, and small caps. This reduces risk.

Gradual Investment: Invest gradually through SIPs. This averages out market volatility.

Building a Strong Portfolio

Diversification: Spread investments across asset classes. Include equity, debt, and liquid funds.

Regular Monitoring: Review your portfolio regularly. Adjust based on performance and goals.

Emergency Fund: Maintain an emergency fund. It covers unexpected expenses and avoids dipping into investments.

Final Insights

Investing in the Kotak Nifty Midcap 50 Index Fund requires understanding its risks and potential. For new investors, a balanced and diversified approach is essential. Consulting a Certified Financial Planner can provide the expertise and guidance needed for a robust financial strategy.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Latest Questions
Ramalingam

Ramalingam Kalirajan  |8319 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 05, 2025

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Dear Sir, I am aged 40 years a aggressive investor I have recent corpus of 13 lac in mutual fund and doing SIP of Rs30500 monthly in following funds . Nippon small cap - 9000 , Tata small cap - 7500 , Quant Small cap - 6000 , kotak small cap - 5000 and Pgmi Flexi cap -3000 and a vision for next 22 years with step up of 10 %. I also invest in PPF of 12500 monthly and In EPF with 25000 basic salary and i will also get Rs 50 lac from various LIC policy at the age of 60 . I want to know that is my approach is right and what would be the future corpus at the age of 62 years .
Ans: You are doing a disciplined and smart job with your investments. You have a long-term horizon, a strong SIP commitment, and a clear goal in mind. That’s a big step many don’t take seriously. Let me now evaluate your approach from all angles. This will be a 360-degree review of your investment plan and future readiness.

Let us go step-by-step to understand if your approach is right and what the future looks like.

Your Current Financial Setup

You are 40 years old now.

You have a mutual fund corpus of Rs 13 lakh.

You invest Rs 30,500 monthly through SIP.

You invest in four small cap funds and one flexi cap fund.

You step up your SIP by 10% annually.

You have a PPF investment of Rs 12,500 monthly.

You contribute to EPF. Your basic salary is Rs 25,000.

You will receive Rs 50 lakh from LIC policies at age 60.

Your investment horizon is 22 years from now.

This is a solid plan and shows discipline. Now, let us evaluate it carefully with insights and suggestions.

Assessment of Mutual Fund Investments

You are investing heavily in small cap mutual funds.

Four out of five funds are from the small cap category.

Small caps give high returns, but they also carry high risk.

Over 22 years, this risk may work in your favour.

But the ride will be bumpy. There will be sharp ups and downs.

At times, you may see short-term losses. That is normal.

However, putting over 85% of SIP in small caps may be risky.

You need better diversification for stability.

Adding large cap and mid cap funds may balance the risk.

Your Flexi cap fund does help a bit, but it is still not enough.

A blend of market caps will give smoother long-term growth.

It is better to slowly bring down small cap exposure to 50%.

Increase exposure to diversified and mid-cap funds gradually.

Don’t exit small cap funds suddenly. Take a phased approach.

This change will make your portfolio strong and well-balanced.

Step-Up SIP Strategy – Strong and Effective

Increasing SIP by 10% annually is a smart idea.

This fights inflation and grows your wealth faster.

It uses your rising income to build a big corpus.

Many investors ignore step-up. You are doing it correctly.

Keep increasing the SIP without fail every year.

Even a break in step-up can delay your target.

Review your SIPs yearly and adjust as income rises.

This strategy will help you reach your target corpus faster.

Investment in PPF – A Safe Long-Term Cushion

PPF offers guaranteed, tax-free interest.

You are investing Rs 12,500 monthly in PPF.

Over 22 years, this will become a strong safe corpus.

It adds stability to your overall financial plan.

PPF is good for retirement since it is risk-free.

Keep continuing till maturity. Do not withdraw early.

Interest rate may vary, but long-term returns are good.

You also get tax exemption under Section 80C.

This risk-free asset will protect you from equity market shocks.

EPF – A Reliable Retirement Contributor

Your EPF is linked to your Rs 25,000 basic salary.

The employer also contributes monthly.

Over 22 years, this will grow into a big amount.

EPF offers fixed, tax-free returns with no market risk.

It is an excellent tool for retirement planning.

Avoid premature withdrawals from EPF.

You can withdraw after retirement for use as income.

This will be a strong pillar of your retirement security.

LIC Maturity at Age 60 – A Special Boost

You will receive Rs 50 lakh from LIC policies at age 60.

This will come at a perfect time near retirement.

You must check if these are traditional or ULIP plans.

Traditional plans offer low returns, mostly below inflation.

ULIPs carry market risk and high charges.

If these are investment-cum-insurance plans, surrendering is wise.

You can reinvest that surrender amount in mutual funds.

Use proper asset allocation while reinvesting.

For insurance needs, use only term insurance.

Reinvesting in mutual funds can make this Rs 50 lakh grow further.

Future Corpus at Age 62 – What to Expect

With SIPs, EPF, PPF and LIC money, your total savings will be huge.

Your mutual fund corpus will grow rapidly with step-up.

Your PPF and EPF will grow safely, year after year.

LIC amount will give a big boost just before retirement.

With 10% SIP step-up, your corpus can cross Rs 9 to 10 crore.

Exact figure depends on market returns, SIP discipline, and inflation.

But you are definitely on the right path to reach financial freedom.

You are preparing for retirement very well.

This kind of planning gives peace of mind and confidence.

Things You Are Doing Right – A Quick Look

Strong SIP discipline and long-term vision.

Investing in equity for long-term wealth creation.

Following step-up SIP approach.

Investing in PPF and EPF for safe returns.

Keeping investment horizon of 22 years.

Maintaining separate LIC maturity plans.

You are showing smart behaviour as an aggressive investor.

Key Improvements You Should Consider

Reduce small cap exposure to 50% slowly.

Add more mid-cap and flexi cap funds.

Avoid overlapping funds from same category.

Review performance of all funds every 6 months.

Check expense ratios and consistency of returns.

Track goal progress once a year with clear targets.

Make sure your portfolio has good asset allocation.

Don’t hold funds only based on past returns.

Always go through a Certified Financial Planner for changes.

This will make your portfolio more stable and return-oriented.

Important Taxation Insight

Long-Term Capital Gains above Rs 1.25 lakh are taxed at 12.5%.

Short-Term Capital Gains are taxed at 20%.

Plan redemptions smartly to reduce tax.

Use staggered withdrawals near retirement.

Redeem equity funds over time, not all at once.

PPF and EPF are tax-free. LIC maturity is also tax-free.

But for mutual funds, plan redemptions with tax efficiency.

This will help you protect your wealth from tax erosion.

Important Notes on Fund Types and Investments

Do not use direct mutual funds if you are not an expert.

Direct funds need self-review and research, always.

There is no handholding or guidance with direct funds.

If you miss fund underperformance, losses may happen.

Regular funds through MFD with CFP advice are safer.

CFP will do goal review, fund analysis and rebalancing.

This adds value and protects your goals from derailment.

Always go through a trusted CFP for a 360-degree plan.

Your long-term wealth deserves the right expert attention.

Finally – Our Insights for You

You are on a great track with vision and discipline.

You are investing smartly across equity and debt.

With minor changes, your plan can become stronger.

Keep focus on diversification and risk management.

Review your goals and progress yearly with expert help.

Stick to your plan even during market falls.

Continue your SIP step-up and never skip contributions.

Use professional guidance to ensure smooth journey.

Your retirement will be financially independent and stress-free.

This approach will help you lead a proud, peaceful life post-60.

Stay committed and consistent. You are doing excellent already.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

...Read more

DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

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